Collectors Sweeping Your Bank Account

Question: Can a collection agency working for the bank sweep your entire bank account every payday?
I am dealing with an overdue overdraft account and made arrangements for weekly payments. I was 2 days late with a payment and they swept my entire account. I thought that worse case, they can only take half? They have been repeatedly sweeping it, even before the late payment. I need to know if they can take everything and leave us nothing to live on? Since every other time it was swept they have returned it.

Right of Offset

Yes, as you have observed, a bank or collection agency can take money from your bank account if you owe money to the same bank. The amount they can remove is the amount that is due. If for example you owe them money on your credit card they can remove that month’s minimum payment. If you owe them the full amount of the loan, they can remove your full deposit, until the debt is repaid or until you deal with the debt.

The immediate solution is to open a new bank account at a new bank (where you don’t owe any money). You can then deposit your paycheque in the new account. Since the old bank and collection agency is not aware of the new account, they can’t automatically seize funds from it. They would require a court order to seize funds from the new account. (Your current bank doesn’t need a court order, since the money is sitting in your account at their bank).

Of course opening a new account is only a temporary solution. The collection agency can still pursue you for the amount owed. If you have other debts, it may be prudent to consider a permanent solution, such as a consumer proposal or a bankruptcy.